Buying a bank foreclosure or HUD property

No matter what are you buying: "Bank foreclosure" (REO), "Short Sale" home or traditional home, you need to know all the details of that particular transaction.

You want to know "why should you by now?"

My answer has two versions, a "short" one and a "long" one.

The short one is :"Wait and do not buy now, and in a couple of years, you will know why it was a good idea to buy now."

Here is the long answer:

People worry that the market may not yet be at the "bottom." People think that prices might go lower.

You can get houses now which will return a lot more than the mortgage payment. The profit you make on the house will show on your next tax return, and will help you to qualify for more borrowing later, in the event that prices go lower, so that you will be able to buy more later, in addition to what you buy now.

But the real reason to buy now is peoples' misunderstanding of what the future holds.

People are thinking that the economy will recover and that house prices will rise to where they were at the top of the housing bubble.

There is a glut of houses on the market, because of over-building, and there are a lot of builders ready to sell what they have, and ready to get busy building more.

There are way more builders right now than our population can sustain. They will need to keep their prices low until enough of them are driven out of business, a shortage starts to develop, and building homes can once again become profitable.

Here is the clincher. Once the economy starts to rebound, prices will start to rise.
Inflation will result.
Interest rates on home purchases will rise.
Home prices will remain frozen, while the cost of purchasing homes continues to rise, due to the increased interest rates.

We expect that the average interest rate for a home purchase will top out between 13% and 20%. The government will do everything it can to help curb inflation, officially.

But actually, inflation will have the effect of lowering the national debt in terms of today's dollars, making the existing debt easier to manage.

And with the HUGE recent increases in the national debt, huge inflation will be needed to help make the debt manageable.

The government will hope that its debt is in dollars rather than in foreign currency during this time. Anyone going into the next five years with an adjustable rate mortgage is going to have trouble.

Anyone with a balloon mortgage is going to have trouble if that balloon occurs anywhere near five years from now.

Once interest rates top out, and then begin to fall from their highs, house prices will again begin to rise. That time is more than five years away.

So here is the summary:

House prices might go lower, or might not. But the current opportunities are extraordinary, so don't pass them up.

For the next five years, house prices will not rise, although the cost of buying a house will rise steadily due to increasing interest rates.

Five to ten years from now, you will find that it costs two or three times more than it does now to buy a house, if you are borrowing money to buy the house, although the actual price of the house will be the same as right now.

Five to ten years after that, after interest rates have dropped back to about 7% or 8%, the cost to buy the house will still be about two or three times more than right now, but it will be the price of the house that is higher, rather than the cost of the financing.

Cash buyers have time to wait. People buying on credit are going to find that they missed the boat.

The longer they wait, the more they will pay for the same house which has the same price.

It won't happen all at once. Instead it will creep up on us. People will decide that it is finally time to get a house, and be surprised to find that 5% interest is no longer available, and that they need to buy a smaller house, because of the cost of financing, not because of the cost of the house.

You can buy many houses now for about half or less what they cost in 2005.

Is this not something we all were waiting for?

First time home buyers can even get up to $11,000 from the government for their home purchase.